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In 2004, the Army began transforming its force into modular brigade-based units, thus expanding the number of units available for deployment and creating new command and support units. The Army is transforming while engaged in the Global War on Terrorism and developing other high-cost capabilities. This prompted congressional concern about the affordability of Army plans. Thus, under the Comptroller General's statutory authority, GAO examined the Army's restructuring. This report addresses (1) the extent of change in costs and areas of uncertainty that could affect those costs, (2) the Army's plan for funding modularity and factors that may affect affordability, and (3) whether the Army has an adequate approach to track modularity obligations.

The Army's cost estimates for its modular force are evolving and have increased substantially, and uncertainty exists that will likely increase costs further. In March 2005, the Army estimated it will need $48 billion to fund modularity through 2011, a 71 percent increase from its 2004 estimate of $28 billion. However, this latest estimate does not include $27.5 billion in personnel and construction costs the Army and GAO identified, bringing potential known costs to $75.5 billion. Uncertainties remain in this estimate related to force design, equipment, facilities, and personnel, which could increase costs or require the Army to reduce capabilities. Until the Army provides a more reliable estimate of its modularity costs, DOD and Congress will not be well positioned to weigh competing requests for funding. The Army's funding plan, which it uses as the basis for developing funding requests, relies on annual and supplemental appropriations and may present future affordability challenges. Uncertainty in cost estimates noted above, reliance on business engineering efficiencies that historically have been difficult for DOD to achieve, and likely cost growth from another high-cost program--Future Combat Systems--collectively pose the risk of making this plan unaffordable. Also, the Army will be creating most of the modular units before it has the funding to support them While the Army can generally identify overall equipment purchases, it lacks an approach for tracking most modularity obligations and thus cannot provide a reliable picture of past spending or future funding needs. Army officials said they had not established a framework to track personnel and equipment obligations in part due to the difficulty of defining whether such expenses were incurred specifically for modularity or to support the force in general. However, we note the Army has made such distinctions in its past funding requests, including identifying specific amounts needed for equipment, and will require such data to develop and justify future requests.

Matter for Congressional Consideration

Status: Closed - Implemented

Comments: On April 4, 2006, at the request of the Subcommittee on Tactical Air and Land Forces, Committee on Armed Services, GAO testified on the Army's plans for restructuring into a modular-brigade-based force. (See Force Structure: Capabilities and Cost of Army Modular Force Remain Uncertain, GAO-06-548T, April 4, 2006). This testimony, which was based in large part on GAO-05-926, concluded that in today's challenging environment, it is important for the Army to clearly establish and communicate its funding priorities and equipment and personnel requirements and assess the risks associated with its plans. Following our testimony, the May 5, 2006 House Armed Services Committee Report on the National Defense Authorization Act for Fiscal Year 2007 took action to require special reporting on the Army's modularity initiative. The report requires that the Secretary of Defense obtain from each combatant commander, an assessment of the Army's modularity initiative to include issues or concerns regarding modularity designs, equipment, personnel and/or rotation strategy. Further, the committee directs the Secretary to submit a report, including the assessments from the combatant commanders, to the Senate Committee on Armed Services and the House Committee on Armed Services with the submission of the President's budget for fiscal year 2008. GAO's testimony was cited in the Committee report and GAO supported the committee staff in developing a reporting requirement for DOD on Army modularity.

Matter: The Congress may wish to consider requiring the Secretary of Defense to provide a plan for overseeing spending of funds provided for modularity.

Recommendations for Executive Action

Status: Closed - Not Implemented

Comments: The transformation of the Army is not a specific budget line item in the Army budget. Instead, funds provided to convert the Army to a modular force are spread throughout various appropriations and programs, which in total contribute to the transformation effort. However, the Army does not plan to establish an encompassing framework that would group Army projects together under the heading of modularity. The Army commented that the administrative costs of such an effort would outweigh any benefit.

Recommendation: To facilitate his oversight of the program and collecting the data for Congress mentioned above, the Secretary of Defense should direct the Secretary of the Army in coordination with the Undersecretary of Defense (Comptroller) to develop a plan for overseeing the costs related to the Army's transformation to a modular force. This plan should include an approach for tracking modular transformation costs that clearly identifies obligations for the modular force.

Agency Affected: Department of Defense

Status: Closed - Not Implemented

Comments: DOD recognized the need for periodic reporting on the Army Modular Force. The Army stated they would provide a report to Congress on the Army Modular Force, and reported to Congress in 1006, 2007, and 2008. However, while the report discusses funding challenges, equipment requirements, and program management oversight practices, it does not address divergences from the plan as stated in the prior year's report and contributing factors.

Recommendation: To improve information available to decision makers on the cost of the Army's plan for modularity, the Secretary of Defense should direct the Secretary of the Army to provide Congress a detailed plan estimating the costs of modularity sufficient to provide Congress reasonable assurance that estimated costs reflect total costs of modularity as designed and tested. Such a plan should be prepared annually and submitted as part of justification material supporting DOD's budget request, until the modular force is fully implemented. It should include divergences from the plan as stated in the prior year's report, and contributing factors.

Agency Affected: Department of Defense

Status: Closed - Not Implemented

Comments: The Army has provided some information on the status of its modularity initiative with its budgets since 2006. However, the report has not included information on obligations related to the modular force from the previous year.

Recommendation: To improve information available to decision makers on the cost of the Army's plan for modularity, the Secretary of Defense should direct the Secretary of the Army to provide Congress a detailed plan estimating the costs of modularity sufficient to provide Congress reasonable assurance that estimated costs reflect total costs of modularity as designed and tested. Such a plan should be prepared annually and submitted as part of justification material supporting DOD's budget request, until the modular force is fully implemented. It should include a report on obligations related to the modular force made the previous fiscal year.

Agency Affected: Department of Defense

Status: Closed - Not Implemented

Comments: DOD recognized the need for periodic reporting on the Army Modular Force. The Army began providing reports to Congress on the Army Modular Force in 2006 and reported on some modularity issues in 2007 and 2008. However, while the report discusses funding challenges, equipment requirements, and program management oversight practices, it does not identify uncertainties in the plan due to pending force structure design decisions or other decisions that may affect costs or update plan as decisions or made.

Recommendation: To improve information available to decision makers on the cost of the Army's plan for modularity, the Secretary of Defense should direct the Secretary of the Army to provide Congress a detailed plan estimating the costs of modularity sufficient to provide Congress reasonable assurance that estimated costs reflect total costs of modularity as designed and tested. Such a plan should be prepared annually and submitted as part of justification material supporting DOD's budget request, until the modular force is fully implemented. It should include identification of uncertainties in the plan due to pending force structure design decisions or other decisions that may affect costs, and updates to the plan as these decisions are made.

Agency Affected: Department of Defense

Status: Closed - Not Implemented

Comments: DOD recognized the need for periodic reporting on the Army Modular Force. The Army stated it would provide a report to Congress on the Army Modular Force Initiative, and it provided reports to Congress in 2006, 2007, and 2008. However, while the report discusses funding challenges, equipment requirements, and program management oversight practices, it does not provide a clear definition of the total costs for modularity as designed and tested.

Recommendation: To improve information available to decision makers on the cost of the Army's plan for modularity, the Secretary of Defense should direct the Secretary of the Army to provide Congress a detailed plan estimating the costs of modularity sufficient to provide Congress reasonable assurance that estimated costs reflect total costs of modularity as designed and tested. Such a plan should be prepared annually and submitted as part of justification material supporting DOD's budget request, until the modular force is fully implemented. It should include estimates for equipment, facilities and personnel.

Agency Affected: Department of Defense

Status: Closed - Not Implemented

Comments: DOD recognized the need for periodic reporting on the Army Modular Force. The Army stated they would provide a report to Congress on the Army Modular Force and reported to Congress in 1006, 2007, and 2008. However, while the report discusses funding challenges, equipment requirements, and program management oversight practices, it does not provide a clear definition of the total costs for modularity as designed and tested.

Recommendation: To improve information available to decision makers on the cost of the Army's plan for modularity, the Secretary of Defense should direct the Secretary of the Army to provide Congress a detailed plan estimating the costs of modularity sufficient to provide Congress reasonable assurance that estimated costs reflect total costs of modularity as designed and tested. Such a plan should be prepared annually and submitted as part of justification material supporting DOD's budget request, until the modular force is fully implemented. It should include a clear definition of what costs the Army does and does not consider to be related to the modular transformation.